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"There is a change in mindset that's taking place, a greater recognition that we can do better." – President Barack Obama
“A crisis is a terrible thing to waste.” – Economist Paul Romer
In the midst of a boatload of bad news these few weeks, there was a huge sign of hope.
The World Economic Forum (think of them like the United Nations of money) launched a new campaign called “The Great Reset.” I encourage you to watch the 90-second video here.
In the accompanying webcast, heavy hitters like Prince Charles, the Secretary-General of the United Nations, and the CEO of Microsoft spoke about using this time in history to fundamentally change the world.
1) FAIRER: Making a market with more equitable outcomes. The richest 1% holds half the world’s wealth -- and during the pandemic, the rich have only gotten richer. For our American readers, here’s an easy way to visualize it: |
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This image is courtesy the Occupy Movement, which we should expect to have a great reawakening in the months to come (or something like it). The CoronaCrisis has widened the gulf between the haves and the have-nots, and the have-nots will increasingly feel the pain.
The Great Reset will be an opportunity to better distribute the world’s wealth. Our goal is a “stakeholder economy,” where everyone feels they have a stake in the economy: that it fairly benefits everyone, not just a privileged few.
2) GREENER: Investing in sustainable infrastructure. With governments creating massive stimulus packages, we have a once-in-a-lifetime opportunity to direct these packages toward green initiatives.
For example, why should we bail out fossil fuel companies, when we could put that money into green energy instead? Why not pay unemployed workers to plant trees? Why not subsidize re-insulation of old buildings? Why not pay for solar production and invest heavily in new battery technology?
Instead of just throwing good money after bad (fossil fuels and legacy industries), we can throw good money at the good: investing in initiatives that will build the next generation of jobs and wealth -- while making a meaningful impact on climate change. 3) SMARTER: We already see that technology companies are doing pretty well during the CoronaCrisis. The high-tech hubs (Silicon Valley, New York, Seattle -- the "haves") are going to emerge the big winners, while the older legacy cities (the "have-nots") are going to increasingly feel the pain.
We must recognize that the old economy is not coming back. The new economy is about well-educated, tech-savvy workers -- what we call “knowledge workers” or “creative workers” -- who rapidly produce new ideas and use them to create new goods and services.
Therefore, we will need to completely rethink our education system. We will have to focus on bringing our kids up to speed with creative tools and digital software, to invest heavily in next-generation technology education. This is a generational change, planting trees for our children’s children.
We’ll also need to invest in “tech hubs” in every city that wants to survive, no matter where they’re located. This means developing a rich ecosystem of the “Three Es” -- education, entrepreneurship, and environment -- to help new and innovative ideas grow and flourish. (For a great example, see Charlotte, North Carolina.) |
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Africa also has the right idea: create a rich network of tech hubs.
It’s easy to be skeptical about these initiatives, to say “That’ll never happen.” But until recently, it was easy to dismiss the warnings of a global pandemic from people like Bill Gates. "Oh, that'll never happen." It was easy to dismiss the warnings of an economic breakdown from people like Ray Dalio and Richard Florida (who wrote the book on The Great Reset). "Oh, that'll never happen."
Guess what? It did.
Today, everyone is talking about the "Recovery," but we're talking about a "Reset." The popular story is that we're in the closing innings of this ballgame, but our story is that it's still early innings.
As blockchain investors, this matters a lot. Here's why.
The Great Reset of the Economy
I spoke with a jeweler this week who has maintained a storefront shop for over 30 years. He told me he's planning on closing down his storefront when his lease expires in a few months.
“Rent is my single biggest expense,” he told me. “I keep a storefront because it brings me foot traffic, which gets new customers into my store.
But I’m living in this shop most of the day. It’s my second home. Would you want 20 strangers a day walking into your home, without knowing who was sick?”
After he told me this, I drove through downtown Boston, where the National Guard was posted throughout the city, with Humvees reading MILITARY POLICE. Shop windows were boarded up, to protect against the possibility of looters. |
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National Guard posted outside the Tesla store. |
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Why would a jeweler want to keep a storefront in an environment like this?
My jeweler friend is looking at his own “Great Reset” of going fully online, INVESTING part of his rent money into online marketing.
Now multiply this story times hundreds and thousands of small businesses across America, and even across the world. Picture boarded-up shop windows all over our major cities.
If this is our future -- and a “hard reset” of the economy is coming -- then what might this look like for blockchain investors?
The ultra-wealthy will move their money elsewhere. Like rats jumping from a sinking ship, they will try to quickly dump their unprofitable real estate ventures and get out of Main Street businesses, moving money into places (and countries) where they think they can get a better return.
Increasingly, they will move into assets that they perceive as safer (such as gold) or higher-growth alternatives (such as bitcoin). In both cases, you can see by the rising prices that this is already happening. |
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Six-month gold price (above) vs. Bitcoin price (below). |
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The bottom line for blockchain investors:
- Don’t panic.
- Consider our Blockchain Investors Portfolio. Consider investing a small amount into digital assets, without betting the farm.
- Consider our Health and Wealth Portfolio. Long-term, the stock market is probably not going anywhere: especially if we focus on companies that provide real value during this time.
Stay focused. Stay calm. Stay healthy. That’s how we’ll build prosperity – and a better world.
That’s how we’ll make the #GreatReset. |
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Health, wealth, and happiness, |
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John Hargrave Publisher Bitcoin Market Journal |
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Hi Everyone,
Finally, the year 2020 has delivered a fantastic surprise. The fact that all the massive surprises so far this year have been historically dismal only makes this news that much sweeter. |
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Stocks are flying in response to this fantastic jobs report, and the recovery rally that seemed to be fading over the last few days is now being extended.
Many people have already asked me how it's possible that the monthly job numbers have gone up in May when all of the weekly unemployment data was terrible. Unfortunately, I don't know the answer to that one. I have posted the question on Twitter, but haven't heard a good explanation as of yet.
Not to look a gift horse in the mouth of course, but it does seem like the problems afflicting the U.S., economic and otherwise, are far from over. Despite what's happening in the markets right now, a 13% unemployment rate is nothing to celebrate.
No doubt the jobs that have been added last month are the ones that were easiest to restore. We've still got a long way to go before returning to normal levels. |
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With much of the country still in lockdown, mass protests and unrest across the country, and an election coming up in November, I'm quite certain that we'll be getting more volatility in the markets over the next few months.
To be continued. ... |
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Good News
The Dow Jones Industrial Average is up 2.5% as of this writing, and it's only an hour after the bell. So clearly, investors are excited about the latest jobs figure. To be fair, I did tell you in yesterday's update that this number would be significant.
In this graph of the Dow, the candles are set to one day, so the last green candle on the right is today's action. |
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Unsurprisingly, gold is down today, as the money rushes from the safe havens toward the more risky stock markets. For the sake of continuity, this graph shows daily candles as well.
As we previously stated, QE will be looking to add to our gold positions only after a more significant pullback, when the precious metal is somewhere in the neighborhood of $1,520. |
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For the moment, the massive stimulus, which according to estimates is totaling about $14 trillion since the start of COVID-19, has not really circulated through the economy, and so inflation remains subdued.
Once people get back to work and start spending again, then the velocity of money can pick up and do its thing. So until then, hedging inflation doesn't really make sense. |
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What about Bitcoin?
Did bitcoin just react to the wonderful jobs data?
Well, the answer is we don't know. Looking at the short term data, we can see that bitcoin did in fact make an upwards move at the time of the news (purple circle), just as the stocks did. However, bitcoin's move was well within the range and it's really difficult to tell if there's any causation happening here from this graph. |
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Long-term data suggests that the correlation between crypto and the stock markets is still elevated, as it has been since the start of the crisis.
Here we can see bitcoin's 90-day correlation to the S&P 500 over the last few years. The measure is currently reading just under 0.5. Even though this figure is extremely high for this particular market, it still does not indicate a particularly significant relationship. It's also come down somewhat since the start of the crisis, but is nowhere near previous norms. |
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My feeling is that over the last year or so, we've been seeing increasing involvement from institutional players, both in terms of volumes and also new structured products hedge funds can use to access this market.
The more big money is involved, the more managers of large portfolios will see it within the context of the traditional markets and use it as a tool to hedge their investments, which seems most likely to only increase the correlation from here.
Guess we'll need to give it more time to see how it plays out.
Many thanks for reading. Hope you enjoyed today's episode of the BMJ Newsletter.
If you enjoyed it, don't be afraid to pass it along to some friends.
Have a fantastic weekend!
Best regards, |
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Mati Greenspan Analysis, Advisory, Money Management |
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